Was yesterday's market rise an anomaly or did it mark a market turning point?
That seems to be the big question of the day for investors large and small. I took a look at my usual data sources and came to the conclusion that not enough is really known yet to fully answer the question but, indicators are strong that we bottomed on Thursday. Here's some facts.
Volume yesterday was higher than the day before when the market dropped 444 points. The volume was the highest in over a month. The Put to Call ratio on Equities rose 3 days in a row, to near yearly highs for a 3 day period. This suggests a reversal in trend to me. However, the volume was not convincing as to whether we reached that climax called "capitulation". Insiders were Buying yesterday in large numbers. With over 200 companies reporting Insider Trading yesterday, over 175 companies reported Buying by Insiders, verses only 25 Insiders reported Selling.
As I have stated a number of times, we can still go lower and may go down as low as 7,000 on the Dow. Whether we were at 7,500 or 7,000, we are for all practical purposes at the bottom. However, this may be an unusual time and the signs of capitulation may look different this time, compared to past analysis. For one thing, there will not be the heavy buying many expect. The reason is quite obvious, there isn't a lot of cash ready to come into this market. Confidence has been damaged, most likely for good. It will not return for a very long time. So any market rise will be tempered by some selling into any rally. Fear is still the dominant emotion, and not until greed finds its way back again, will this market rise and then only slowly. It most likely will get knocked down on any substantial gains. So don't expect the Dow to go over 10,000 again, anytime soon. We are talking years in my view. And the reason compounding this will be the continued bad news around unemployment and the usual cutting of revenue and earnings estimates by companies for a long time to come. Some companies are in denial and not taking appropriate cuts given such a dramatic occurrence in the credit markets, Wall St. and now Main St. It is to their peril if they ignore the facts and the indicators of what is coming over the next year.
I am convinced that money can be made by buying ETF Indexes and trading them as stocks. When the Dow, S&P 500 and Nasdaq all are near bottoms, it is wise to buy Ultra Pro shares of these indexes. Similarly when the market rises and nears the recent highs of 9,500 on the Dow it is recommended to sell them and buy the Ultra Short ETF's at the same time. I will continually give buy and sell signals of these ETF's over time so check here if you own any.
As I said on Thursday, I sold my SP 500 ETF Ultra Short shares, symbol SDS, as well as my Dow ETF Ultra Short shares, symbol DXD. I also bought the SP 500 Ultra Pro shares, symbol SSO at the same time.
President-Elect Obama will announce his team in the coming week or two and that should give some confidence that we have a group of smart, capable and experienced people going to be assisting our new President, immediately when the transfer of power happens on Jan. 20th.
In the meantime, think about what you are grateful for in the midst of the worse financial and economic crisis since the Great Depression and give thanks this coming Thursday. Think of those suffering in silence and pray for them. Think about how you are going to help contribute to a better America. The place to start is where you live and look around at your neighbors, your churches, your local government and your local businesses. You can make a difference and you will make a difference. It only depends on whether you choose to help or not.
Happy Thanksgiving week to you all.
Volume yesterday was higher than the day before when the market dropped 444 points. The volume was the highest in over a month. The Put to Call ratio on Equities rose 3 days in a row, to near yearly highs for a 3 day period. This suggests a reversal in trend to me. However, the volume was not convincing as to whether we reached that climax called "capitulation". Insiders were Buying yesterday in large numbers. With over 200 companies reporting Insider Trading yesterday, over 175 companies reported Buying by Insiders, verses only 25 Insiders reported Selling.
As I have stated a number of times, we can still go lower and may go down as low as 7,000 on the Dow. Whether we were at 7,500 or 7,000, we are for all practical purposes at the bottom. However, this may be an unusual time and the signs of capitulation may look different this time, compared to past analysis. For one thing, there will not be the heavy buying many expect. The reason is quite obvious, there isn't a lot of cash ready to come into this market. Confidence has been damaged, most likely for good. It will not return for a very long time. So any market rise will be tempered by some selling into any rally. Fear is still the dominant emotion, and not until greed finds its way back again, will this market rise and then only slowly. It most likely will get knocked down on any substantial gains. So don't expect the Dow to go over 10,000 again, anytime soon. We are talking years in my view. And the reason compounding this will be the continued bad news around unemployment and the usual cutting of revenue and earnings estimates by companies for a long time to come. Some companies are in denial and not taking appropriate cuts given such a dramatic occurrence in the credit markets, Wall St. and now Main St. It is to their peril if they ignore the facts and the indicators of what is coming over the next year.
I am convinced that money can be made by buying ETF Indexes and trading them as stocks. When the Dow, S&P 500 and Nasdaq all are near bottoms, it is wise to buy Ultra Pro shares of these indexes. Similarly when the market rises and nears the recent highs of 9,500 on the Dow it is recommended to sell them and buy the Ultra Short ETF's at the same time. I will continually give buy and sell signals of these ETF's over time so check here if you own any.
As I said on Thursday, I sold my SP 500 ETF Ultra Short shares, symbol SDS, as well as my Dow ETF Ultra Short shares, symbol DXD. I also bought the SP 500 Ultra Pro shares, symbol SSO at the same time.
President-Elect Obama will announce his team in the coming week or two and that should give some confidence that we have a group of smart, capable and experienced people going to be assisting our new President, immediately when the transfer of power happens on Jan. 20th.
In the meantime, think about what you are grateful for in the midst of the worse financial and economic crisis since the Great Depression and give thanks this coming Thursday. Think of those suffering in silence and pray for them. Think about how you are going to help contribute to a better America. The place to start is where you live and look around at your neighbors, your churches, your local government and your local businesses. You can make a difference and you will make a difference. It only depends on whether you choose to help or not.
Happy Thanksgiving week to you all.
Labels: bottom, capitulation, Dow, ETF's, Happy Thanksgiving, Insider Buying, Insider selling, Jan. 20th Inauguration, market, Nasdaq, President-Elect Obama, SP 500
posted by Charles Amico at 8:39 AM
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